Ministry seeks to cut pension ante in '12

The Finance Ministry is considering reducing the government's contributions to the national pension program in the fiscal 2012 budget, reflecting a possible delay in raising the politically sensitive consumption tax, officials said Friday.

The government normally takes responsibility for 50 percent of the basic pension program. But the ministry is now seeking an agreement to temporarily lower the ratio to 36.5 percent, while the Health, Labor and Welfare Ministry is opposed to the idea.

Reducing the share from the central government coffers would lead to a shortfall of some ¥2.6 trillion in the program, with the gap having to be plugged by tapping pension reserves, or an accumulation of pension premiums paid by the public. The Finance Ministry plans to return the borrowed money with interest to the reserves when it has the funds.

The move comes as the government is likely to take a longer time than earlier thought in preparing a consumption tax hike, proceeds from which would be used to maintain the 50 percent contribution to the program.

Prime Minister Naoto Kan's Democratic Party of Japan-led government agreed in June to double the consumption tax to 10 percent in stages by the mid-2010s and deal with swelling social security costs.

But it remains uncertain if an agreement can be reached on when and by how much the tax should be increased.

In addition, the officials said, Kan's planned resignation and a subsequent DPJ presidential election have added to the uncertainty as potential candidates have different views over the consumption tax hike.

Reconstruction costs from the March 11 earthquake and tsunami have also placed a huge financial burden on the government, forcing the Finance Ministry to seek the reduced pension contribution, according to the officials.

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